3, 2026 CALL PARTICIPANTS Chief Strategy Officer and Head of Investor Relations - Erik BassPresident and Chief Executive Officer - Mark PearsonChief Financial Officer - Robin Matthew RajuPresident of Equitable Financial - Nick LaneChief Executive Officer of AllianceBernstein - Seth Perry BernsteinChief Financial Officer of AllianceBernstein - Tom Simeone Non-GAAP Operating EPS -- $2.13 ($1.98 excluding notable items), up 19% year over year due to momentum in core retirement and wealth businesses.Net Income -- $1.1 billion ($4.05 per share), compared to a net loss of $1.3 billion in the third quarter of 2025.Total AUM/A -- $1.2 trillion, representing a 4% year-over-year increase driven by positive net flows and favorable equity market performance.Retirement Net Inflows -- $1.1 billion, supported by 14% growth in overall sales and record sales of retirement rider solutions.Wealth Management Advisory Net Inflows -- $2.7 billion, which management reported as a record for the segment.AllianceBernstein Net Inflows -- $6.6 billion, with $15.7 billion in institutional strength offsetting outflows in the retail and private wealth channels.AB Private Markets AUM -- $105 billion, up 33% year over year and exceeding the company's target range of $90 billion to $100 billion.Alternative Investment Returns -- 5%, sitting at the upper end of the quarterly guidance range but below the long-term expectation of 8% to 12%.Identified Expense Savings -- $100 million, to be recognized as run-rate savings in the first half of 2027 following merger-related leadership announcements.Dividend Payout Ratio -- 59% in the third quarter, keeping the company on track for its targeted full-year range of 60% to 70%.Wealth Management Segment Earnings -- $75 million, up 27% year over year reflecting 22% growth in advisory assets and increased advisor productivity.Retirement Net Interest Margin -- Increased 12% year over year, aided by general account asset growth and higher alternative investment returns.HoldCo Cash and Liquid Assets -- $900 million, exceeding the company's minimum target of $500 million.Advisor Productivity -- Increased 14% on a trailing 12-month basis, driven by the company's holistic life planning and wealth management strategy.Full-Year Performance Fee Guidance -- $135 million to $150 million, implying a fourth-quarter range of $62 million to $77 million.Full-Year EPS Growth Guidance -- Greater than 15%, which management confirmed remains the target following 22% growth year to date.Spread Lending Net Issuance -- $500 million, which is not included in the segment's reported net flows.Commercial Mortgage Loan Mandate -- $12 billion, onboarded by AllianceBernstein from Equitable to enhance private market platform capabilities.Institutional Net Inflows -- $15.7 billion, driven by recent large mandates despite lower base fee rates on those specific wins.Year-End Cash Generation Forecast -- $1.8 billion for the full year 2026, according to company projections.Total General Account Investments -- $145.2 billion, compared to $133.5 billion at the end of 2025.Wealth Management Advisory Assets -- Up 22% year over year, reflecting strong organic momentum and the impacts of the Stifel acquisition.
Need a quote from a Motley Fool analyst? Email [email protected] Raju stated, "Higher interest rates pressured real estate returns for the quarter, and will likely remain a near term headwind," regarding the 20% of the alternative investment portfolio held in real estate equity.Raju noted that DAC amortization increased $18 million sequentially, which management attributed to growth in the block and an assumption update capturing higher lapse rates.
Equitable Holdings, Inc.
(EQH +2.27%) reported third-quarter 2026 financial results and provided updates on its pending merger with Corebridge Financial.
Management reported that the company achieved double-digit growth in earnings per share and positive organic growth across its Retirement, Wealth Management, and Asset Management segments.
The firm finalized the divestiture of its employee benefits unit on Oct.
1, 2026, as part of a strategy to focus resources on higher-scale retirement and asset management platforms.
The company stated that it has received initial regulatory approvals for the merger and expects the transaction to close by the end of 2026.
CEO Pearson stated, "demographic factors have further crystallized this need.
With over 4 million Americans turning 65 each year," regarding the growing demand for guaranteed retirement income solutions.The company expects the new combined entity to generate $70 billion to $80 billion of new liabilities annually across retail and institutional channels.Management confirmed a targeted at least $500 million of run-rate expense savings by the end of 2028 through the integration of IT systems, real estate, and vendor consolidation.The company plans to leverage artificial intelligence during the merger integration to enhance productivity and improve the customer experience.Management noted that the $37 million reinsurance true-up in the life insurance business was an internal accounting adjustment and does not impact economic cash flows.Seth Perry Bernstein reported that AllianceBernstein's institutional backlog remains healthy, including anticipation of managing $100 billion from the new entity post merger.Nick Lane indicated that the average age of the company's advisor force is 10 years lower than the industry average of 57 years, providing a durable pipeline for wealth management growth.
INDUSTRY GLOSSARY RILA (Registered Index-Linked Annuity): A type of annuity that offers growth potential based on a market index while providing downside protection.AUM/A (Assets Under Management and Administration): The total market value of assets that a financial institution manages or administers on behalf of clients.NIM (Net Interest Margin): The difference between the interest income generated and the amount of interest paid out to lenders or policyholders.DAC (Deferred Acquisition Costs): The costs associated with acquiring new insurance contracts, which are capitalized and amortized over the life of the contract.RBC (Risk-Based Capital): A regulatory measurement of the minimum amount of capital appropriate for an insurance company to support its business operations.CML (Commercial Mortgage Loan): A loan secured by a commercial property rather than residential real estate.AOCI (Accumulated Other Comprehensive Income): A component of shareholders' equity that includes unrealized gains and losses on certain investments.LTV (Loan-to-Value): A ratio used in lending to express the amount of a loan as a percentage of the total value of the asset securing it.
Full Conference Call Transcript Operator: Hello everyone, thank you for joining us and welcome to Equitable Holdings Inc.
Third Quarter 26 Earnings Call.
After today's prepared remarks, we will host a question and answer session.
If you would like to ask a question, please press star 1 to raise your hand.
To withdraw your question, please press star 1 again.
I will now hand the conference over to Erik Bass, chief strategy officer and head of investor relations.
Erik? Please go ahead.
Erik Bass: Thank you.
Good morning, and welcome to equitableholdingsthird0.252020earningscall.materialsfortoday'[email protected].
Before we begin, I would like to note that some of the information we present today is forward looking and subject to certain SEC rules and regulations regarding disclosure.
Our results may differ materially from those expressed in or indicated by such forward looking statements.
Please refer to the safe harbor language on Slide 2 of our presentation for additional information.
Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings Robin Matthew Raju, our Chief Financial Officer Nick Lane, President of Equitable Financial Seth Perry Bernstein, chief executive officer of AllianceBernstein.
And Tom Simeone, chief financial officer of AllianceBernstein.
During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles.
Also known as non GAAP measures.
Reconciliations of these non GAAP measures to the most directly comparable GAAP measures and related definitions be found on the Investor Relations portion of our website and in our earnings release slide presentation and financial supplement.
We will also refer to the pending transaction with Corebridge.
Any statements about the transaction made during this call are not an offer of securities.
A registration statement containing a prospectus will be filed with the SEC in connection with the transaction.
I will now turn the call over to Mark.
Mark Pearson: Good morning, and thank you for joining today's call.
Equitable's third quarter results highlight the company's strong momentum heading into the merger with Corbridge.
As we delivered double digit growth in earnings per share and positive organic growth across all businesses.
The current macro environment and population demographics underscore the need for the financial advice and product solutions we provide.
As our customers face rising costs, higher interest rates, and limited options for guaranteed retirement income.
As we build a new Equitable and leverage our scale, distribution breadth, and complementary product offerings we see tremendous opportunity to reach more customers expand our business, and deliver value for shareholders.
Starting on Slide 4, I will provide a few highlights from the third quarter.
We reported non GAAP operating earnings per share of $2.13 or $1.98 excluding notable items.
Which is up 19% year over year.
Through the first 3 quarters of the year, EPS excluding notable items has increased 22% from 2025.
Consistent with our guidance for greater than 15% growth in 2026.
We ended the quarter with $1.2 trillion of assets under management and administration, up 4% year over year.
Driven by positive net flows and uplift from favorable equity markets.
We returned $320 million capital to shareholders during the quarter, which equates to a 59% payout ratio.
Year to date, we have a payout ratio of 66% consistent with our 60% to 70% target range.
Organic growth trends remain solid across our businesses.
In Retirement, we had total net inflows of $1.1 billion driven by 14% growth in overall sales.
This includes record rider sales, and we continue to see strong demand for our protected equity and retirement income solutions.
We also had $500 million of spread lending net issuance, which is not included in net flows.
Turning to wealth management, we continue to see strong new business momentum.
With record $2.7 billion of advisory net inflows.
Advisor productivity increased 14% on a trailing 12-month basis.
Finally, Alliance Bernstein reported total net inflows of $6.6 billion with strength in institutional offsetting outflows in retail and private wealth.
AB's private markets AUM ended the quarter at $105 billion up 33% year over year.
And above the $90 billion to $100 billion target level.
During the quarter, AB expanded its private markets platform, by enhancing its commercial mortgage loan capabilities and onboarding $12 billion of loans from Equitable.
These assets will begin to generate fees in the fourth quarter and more importantly, AB now has a more robust offering to win mandates, from third party clients.
This is another example of the flywheel benefits between Equitable and AB.
We also completed the sale of our employee benefits business to the heart effective October 1st.
While we like the employee benefits market, we lack the scale to effectively compete and grow the to a meaningful level of earnings.
Lastly, we continue to make progress in establishing the operating model for new Equitable.
During the quarter, we selected the Board of Directors for the new company.
And we have named the top 500 leaders for the organization.
So that we can hit the ground running in January.
Regulators have begun to sign off on the merger and we expect to receive all required approvals in the fourth quarter so that we can close at year end.
Moving to Slide 5, I want to spend a minute discussing the industry backdrop and why we see tremendous growth opportunity for new Equitable.
US retirement represents 1 of the most attractive for financial services that I have seen anywhere in the world.
The total US retirement asset pool has grown 7% annually over the past 10 years, and now exceeds $50 trillion representing 65% of global retirement assets.
More than half of these assets sit in IRAs or defined contribution plans, where individuals control the funds and bear the investment risk.
As a result, there is an incredible need for financial advice and solutions to help Americans manage market risks and ensure they have sufficient retirement income.
Demographic factors have further crystallized this need.
With over 4 million Americans turning 65 each year.
This baby boomer retirement wave creates significant money in motion with nearly $1 trillion of IRA rollover activity each year.
And the life insurance industry is well positioned to capture significant inflows.
We see rising demand from customers and advisers for protected equity solutions like RILAs, and the guaranteed retirement income that our industry is uniquely positioned to provide.
Annuity sales have increased at a 16% CAGR over the past 5 years, are approaching $500 billion annually.
Higher interest rates enhance the consumer value proposition of annuities, providing another tailwind for sales moving forward.
In addition, the inclusion of guaranteed income allocations within target date funds expands access to a broader pool of customers and creates a sizable new market.
Finally, demographics will drive significant wealth transfer activity.
Shifting assets to the next generation and underscoring the need for personalized financial advice.
As a result, we view retirement savings, decumulation, and wealth management as secular growth opportunities.
And meeting this need is central to Equitable's mission and business model.
As highlighted on Slide 6, the new Equitable will be very well positioned to capture the US retirement growth opportunity and deliver attractive returns to shareholders.
On a trailing 12 month basis, Equitable and Corbridge have generated over $48 billion of combined annuity sales.
Which is over $10 billion higher than the next largest competitor.
And represents approximately 10% market share.
New Equitable will be the only company with a top 5 position in each major product category.
And this breadth makes us critical to distribution partners.
It also provides flexibility to adapt to changing customer demand trends and pricing conditions.
Importantly, our size also shows up in higher earnings.
With Corebridge and Equitable generating over $4 billion of combined operating income in 2025.
Our superior scale will drive multiple competitive advantages.
Our differentiated ability to source liabilities, coupled with partnerships with leading asset managers, including AB, BlackRock, and Blackstone, will enable us to access more directly originated assets and achieve higher risk adjusted yields.
We also expect to have lower average cost of funds, driven by a strong multichannel distribution network which includes over 5 thousand Equitable and Corbidge advisers.
As alluded to earlier, the breadth of our retail and institutional product offering will give us flexibility to adjust to market conditions and allocate capital where we see the most attractive returns.
In addition, our size should yield superior operational scale and lower expense ratios.
Allowing more of the spread and fee income we generate to fall to the bottom line.
Finally, our business model means that we capture the full value chain by acting as a manufacturer, distributor, and asset manager.
This gives us multiple sources of revenue on each transaction including high multiple distribution and asset management fees.
Putting it all together, we expect New Equitable to have lower average unit costs than peers.
Allowing us to provide attractive consumer value while also delivering compelling growth and returns for our shareholders.
This is a key strategic benefit from the merger.
And it gives us a clear right to win in the large and growing U.
Retirement market.
As this becomes clear to investors, we see meaningful potential upside in our valuation.
I will now turn the call over to Robin to discuss our financial results in more detail.
Robin Matthew Raju: Thank you, Mark.
On Slide 7, I will provide more detail on our third quarter results.
On a consolidated basis, non GAAP operating earnings were $595 million or $2.13 per share, while net income was $1.1 billion or $4.05 per share.
Excluding notable items, non GAAP operating earnings, per share was $1.98.
Up 19% year over year.
Notable items in the quarter included our annual assumption review, which had a $28 million favorable impact on operating earnings.
A model update benefit of $11 million and a legal reserve accrual of $15 million We also called out a $37 million out of period reinsurance benefit in our individual life business.
Which, while onetime in nature, effectively offset some of the adverse mortality reported in prior periods.
Finally, we reported $20 million of below plan alternative investment returns.
Our alternatives portfolio represents about 3% of our total general account.
And produced an annualized return of 5% in the quarter.
This was at the upper end of our 4% to 5% guidance range.
But below our long term expectation of 8% to 12% returns.
Higher interest rates pressured real estate returns for the quarter, and will likely remain a near term headwind.
We currently forecast a low single digits return in the fourth quarter.
Our consolidated tax rate was 20% for the quarter, consistent with our guidance.
Putting it all together, we are pleased with the company's earnings momentum.
As Mark mentioned, non GAAP earnings per share ex notable items, is up 22% year to date.
Putting us well on track to achieve our guidance of greater than 15% growth for the full year.
Turning to Slide 8.
I will provide some further details on our segment level earnings drivers.
In retirement, third quarter earnings, excluding notable items, were $409 million.
Net interest margin, or NIM, increased 12% year over year and 5% sequentially.
Helped by growth in general account assets and higher returns in our alts portfolio.
If you exclude the impact of alternatives, core spreads, slightly decreased by 5 basis points sequentially.
Which we attribute primarily to timing factors.
This quarter, spreads declined due to higher cash balances, and credit earning rates for our 1-year RILE contracts.
Which reset more quickly than floating rate asset yields.
We expect to see some noise in quarterly spreads.
Particularly during periods of volatile interest rates.
And continue to forecast go forward spreads to be roughly stable with the level from the first half of 26.
Fee based revenues rose 1% sequentially and 16% year over year, driven by strong separate account returns.
On the expense side, DAC amortization increased $18 million sequentially.
Which reflects both growth in the block and an assumption update capturing higher lapse rates.
We view this level as a good baseline for the fourth quarter.
Turning to asset management.
AB reported earnings of $152 million roughly flat year over year.
Total AUM ended the quarter at $900 billion down slightly from the second quarter as positive net flows were offset by negative fixed income returns.
The average base fee rate of 37.1 basis points declined modestly due to mix shift and timing as the new $12 billion commercial mortgage loan mandate will begin to accrue fees in the fourth quarter.
While some of the recent large institutional wins have a lower base fee rate, they generate an attractive incremental margin on new revenues.
And AB's adjusted margin increased 50 basis points sequentially.
We also raised our guidance for the full year performance fees.
To $135 to $150 million.
Which implies a range of $62 million to $77 million for the fourth quarter.
Moving to wealth management.
This business reported exceptionally strong third quarter earnings of $75 million up 27% year over year.
This reflects robust organic growth momentum, with advisory assets up 22% year over year.
And a 14% increase in adviser productivity.
Results also benefited from a 1-time payment related to the Stifel acquisition.
Which effectively offset some expenses accrued earlier in the year.
Looking forward, we view $70 million as a good baseline expectation for fourth quarter earnings.
Finally, Corporate and Other reported a loss of $82 million after adjusting for notable items.
Results this quarter benefited from improved mortality experience and lower expenses.
In addition, we moved results from the exited employee benefits business which generated a small loss in the quarter below the line.
The year to date corporate and other loss adjusting for notable items, is $286 million and we continue to forecast a loss of $350 million to $400 million for the full year.
Turning to Slide 9.
We returned $320 million of capital to shareholders during the quarter.
Including $238 million of share repurchases.
Our payout ratio was 59% for the quarter.
And has been 66% year to date, putting us on track for our targeted 60% to 70% payout ratio.
For the full year.
We ended the third quarter with $900 million of cash and liquid assets at the holding company.
Up from $800 million We also brought a portion of our proved insurance subsidiary dividend to the HoldCo in third quarter.
And we continue to project full year 2026 cash generation of $1.8 billion Adjusted book value per share ex AOCI with our AB ownership stake at market value was $34.25.
Yielding an adjusted leverage ratio of 25.5%.
As a reminder, at the close of the merger with Corebridge, our GAAP shareholders' equity will be reset to reflect the fair value of assets and liabilities.
This will result in a more meaningful book value.
Return on equity, and leverage ratio.
Overall, we feel good about the financial momentum across the company.
And we will enter the merger from a position of strength.
We are also making good progress on integration planning and expense synergies.
And we have good line of sight into revenue synergies which will be quantified at investor day.
As a proof point, we have identified over $100 million of run rate expense savings that will be recognized in the first half of 27.
This puts us well on track to achieve the targeted a $150 million of run rate savings in the first year post merger.
And we remain confident in achieving at least $500 million of run rate savings by the end of 28.
Since this will likely be Equitable Holdings last earnings call, prior to the merger I want to take this opportunity to thank Mark Pearson for his leadership at Equitable since 2011.
And the personal mentorship he is provided to me over the years.
I am equally excited to work with Mark in his executive chair role and Marc Costantini as the CEO of the new Equitable in delivering on the promise of this merger.
I will now pass the call back over to Mark.
Mark Pearson: Thanks, Robin.
With the merger expected to close by year end, this will be my last earnings call as Equitable's CEO.
Before handing the reins to Marc Costantini and assuming the role of executive chairman.
As I reflect on my journey, I am proud of the actions we have taken to strengthen our balance sheet shift our business mix, and enhance returns while delivering on our mission to help Americans secure financial well-being and retire with dignity.
Thank you to all our employees and advisers who have worked so hard to get us to this point.
Looking forward, I am incredibly excited about the opportunity for new Equitable.
As we complete the merger with CoreBridge.
And I look forward to working with Mark and the board to deliver on the opportunity in front of us.
We will have the platform capabilities, and talent needed to win with customers and secure our place as the largest and most profitable US retirement protection asset and wealth management company.
We now look forward to taking your questions.
Operator: We will now begin the question and answer session.
Please limit yourself to 1 question and 1 follow-up.
If you would like to ask a question, please press star 1 to raise your hand.
To withdraw your question, please press star 1 again.
We ask that you pick up your handset when asking a question to allow for optimum sound quality.
And if you are muted locally, please remember to unmute your device.
Please stand by while we compile the Q&A roster.
Your first question comes from the line of Suneet Kamath from Jefferies.
Your line is open.
Please go ahead.
Suneet Kamath: Thanks.
Good morning.
First, congratulations and best of luck to Mark.
Thanks for all of your help, over the years.
I wanted to start with sure.
I wanted to start with the higher interest rate environment.
Obviously, we spiked in the quarter and then things have come back.
Are you seeing anything in terms of policyholder behavior whether it relates to lapses or even product design as it relates to annuity competition.
We have not seen rates this high and moved this quickly in a while, I just want to make sure we are not seeing sort of any unintended consequences.
Robin Matthew Raju: Sure.
Suneet, I can start, and thanks for thanks for your question.
So look, overall, we think the high interest rate environment is good for our business across the retirement business.
You saw us have positive net flows of 1.1 billion record sales in RILE, But with that also comes some higher lapses that you saw as well.
So there is a balance that you see in these specific scenarios, but nothing that we see that would cause concern at this point in time Higher interest rates mean more options for consumers, and annuities are a good place to have, whether it be FIAs or RILA products.
Some pressure on AV assets on the fixed income side with higher rates.
As higher rates brought that AUM down.
But we think as rates stabilize, that asset class is differentiated with AB's strong performance in that category as well.
From the only thing I highlighted on the call was on the alternative side.
Higher rates have a negative impact on the real estate equity exposure.
So that is why we guided to a lowered single digit return for the fourth quarter.
that is the only other thing that we are seeing at this time.
But overall, we think higher interest rates are a good position to be in.
And remember, our interest rate sensitivity that we disclosed to the market, every 50 basis points, it is about $40 million of operating....
